Standing Committee D

[Derek Conway in the Chair]

Consumer Credit Bill

Clause 9 - Notice of sums in arrears under fixed-sum credit agreements etc.

Amendment proposed [this day]: No. 31, in clause 9, page 8, line 16, leave out 'four' and insert 'eight'.—[Charles Hendry.] 
Question again proposed, That the amendment be made.

Charles Hendry: May I start by welcoming you to the Chair this afternoon, Mr. Conway?
We had an extremely productive morning, and I am sure that the Minister, having had a productive lunch and thought about the subject further, has come back persuaded by the wisdom and force of our arguments for the amendment.

Gerry Sutcliffe: Not quite.
Charles Hendry: In that case, we have a little way to go, but we will continue to work on him.
A key point that we strongly endorse was raised by the hon. Member for North Norfolk (Norman Lamb). Under the amendment, we are talking about aggregate payments. We are talking not about four payments missed in a row, but about payments missed over the entire period of the contract. As a result, a different set of circumstances emerges for someone who is starting to miss repayments regularly, or for someone who makes payments sporadically. In the latter case, it is extremely likely that the person missed the repayments with the understanding and knowledge of the company from which they have borrowed. The company probably said, ''Fine, go ahead; we understand that you need to miss this week. We'll simply extend the period by one week. There is no further debt to you, and there is no penalty for extending the period by a week—or by two, three or four'' That is totally understood.'' 
The circumstances may be different if someone has missed four payments in a row, and we accept that. However, in relation to home credit, there is a case for saying that reasons for missed payments will be even better understood than they would be for monthly payments. That is because if someone goes to the debtor's door week in, week out, they understand the circumstances and that sometimes people simply cannot pay. It is not that they have chosen to miss the payment; they simply do not have the funds that week, although they are endeavouring to pay their creditor and are extremely conscientious about trying to do so. In those cases, the people collecting the payments probably have a better understanding of the  circumstances and the reasons why payments are missed than they do of the reasons why someone has not paid a standing order or direct debit for a couple of months. 
In his response to my earlier comments, the Minister said that he hoped that the companies concerned would approach the matter in a consumer-friendly way. That is directly at loggerheads with one of the key tenets of the Bill, which is that the relationship is presumed to be unfair unless the lender can prove it to be fair. Given that presumption, the lender cannot start doing things in a consumer-friendly way; they have got to go by the letter of the law. They must be certain that if they have to stand up in court they can say that they did everything possible to make the debtor fully aware of the delay. They should be able to say that they made it clear on the envelope that the letter was serious correspondence, and that they made it clear through the force of the letter that the debtor was in arrears. I do not see how that can be done in a consumer-friendly way when we are talking about something that could easily be brought to court, and on which the whole future of this debate will depend.

Gerry Sutcliffe: Welcome to the Chair, Mr. Conway.
A consumer-friendly way to give the notice is to do so in letter form, however, the notice does not have to be given in a formal notification. That is what I meant by it being consumer-friendly. I understand what the hon. Gentleman says, but later I hope to make some points that will convince him.

Charles Hendry: I am sure, like me, that the Minister is aware from his constituency experience that people who are in debt—particularly the category that we are talking about—are frightened. They are deeply anxious about how they are to repay the money. All too often they tuck the letter away. They do not even open it; they just put it away in a drawer and think, ''Well, perhaps if I do not open it, it will go away.'' The whole nature of the situation is bound to be worrying; indeed, it is intended to be, because it is about being told, ''You are in arrears'', even though, as we said earlier, many of these people are not in arrears.

Michael Penning: I cannot remember which Chairman you are; I do apologise—[Hon. Members: ''Mr. Conway.'']—Mr. Conway.

Derek Conway: I am the good-looking one. [Laughter.]

Michael Penning: I grew up on estates where the door-to-door lender was a way of life, and I know that there is a fear factor that we have not really addressed; I hope that the Minister will do so. Often in such households, other members of it do not know that a person has borrowed money, and they are often very fearful when they find out about it. What worries me about going down the formal route of sending letters to these people is that it will appear—the letter will suggest—that they have done something wrong, even though, as we all agree, it is an aggregate problem and they have not done anything wrong. They have not broken any agreement, and they will not incur any  extra costs or interest payments. However, the fear felt within the household concerned could be considerable.

Charles Hendry: My hon. Friend makes an important point. People are extremely concerned about this. Other members of the household might not know that somebody has been borrowing money, and a letter might arrive stating, ''I am writing formally to advise you, as I am required to by law, that you are in arrears, having missed four payments.'' In those circumstances, no matter how hard the person concerned tries to explain, other people in the household will simply not believe that they are not in arrears. That will create tremendous tensions and pressure in the family. That is a certain way of driving people to loan sharks. The sort of people who will lend money in an illegal way are the sort of people who will not honour these sort of commitments. People who want to keep things quiet or secret will be forced more in that direction.
I urge the Minister to consider the matter further. In a letter published in The Independent yesterday, the Reverend Paul Nicolson observed: 
''There are seven million adults in the UK with literacy age of 11 years, who will not be able to read the leaflets—let alone fill in the forms.''
Some of those adults are the sort of people we are talking about—people who are borrowing because they have no other way of paying the weekly bills. We must find a better way than the one currently being proposed to look after their interests and give them protection. 
I ask the Minister to consider two options. First, a distinction must be drawn between cases in which four payments have been missed in a given period—two months, let us say—and cases in which payments have been missed over a much longer period, for instance on a year-long contract. Secondly, as the hon. Member for North Norfolk suggested this morning, the letter of arrears notification should not apply where there is no prejudice to the interests of the consumer, so in circumstances where no additional debt is incurred—no charges or additional interest payments—that letter will not need to be sent. We are all trying to avoid causing unnecessary distress to people, but the position that the Minister is pushing for will cause precisely that.

Gerry Sutcliffe: I acknowledge hon. Members' fears about this issue. We are talking about short-term credit and people on weekly payments. Surveys and research show that they are at higher risk of having debt problems. Even though they do not incur charges or interest on some missed weekly payments, I am concerned that the amendment extends the period in question from the six weeks that we propose.
I am concerned about people missing payments, whether aggregated over four weeks or independently over a period of time. I am worried about allowing that position to arise, given the research that has been done on people with short-term loans.

James Brokenshire: Talking about research, I was looking at some literature on this matter from the Consumer Credit Association. I respect what the Minister says about the need to  alert people when they are in arrears, so that an alarm bell is rung, they can get debt counselling, and steps can be taken at an early stage. The key question is whether the Bill sets out the right way and the right time to do that, hence the amendment. As the Consumer Credit Association says, the
''customer is likely to be alarmed at getting such a notice. This will come across as an aggressive move by the lender.''
Does the Minister have any thoughts on that?

Gerry Sutcliffe: Again, I thank the hon. Gentleman for the spirit and the intention of his comment. We do not disagree about what we want to achieve; it is the method of achieving it that we disagree about.I still do not think that the amendment is the right solution, but I recognise that there is a problem. I think, the safest thing to do is, at a later stage, to reflect on the issue how to differentiate the different categories of missed repayment.

Michael Penning: I seek clarification. I am aware that the Minister has had research done, as have other people. What I am frightened about—I think we are all frightened about this—is driving people to the loan sharks and thugs that work on the streets. If people think that they will be harassed for something that they have not done wrong, they will look for an alternative that will not harass them. That is dangerous. Perhaps later we can examine the aggregated period and consider options so that if someone gets four weeks behind, it is not aggregated. What we do not want to do is drive people to the thugs and nasty guys.

Gerry Sutcliffe: I fully accept that, and as I said this morning, the Bill is not the only vehicle that we are using to tackle the problem of loan sharks. Had I been able to answer my question at Trade and Industry questions this morning, I would have talked about what else we are doing. I agree that we do not want to drive people from the legitimate market into the hands of loan sharks. However, I am not convinced that the amendment is the best vehicle for delivering what we all want, because arrears notices are a warning, even though I accept that technically there may not be an arrears position.

Charles Hendry: The Minister accepts that there may not be an arrears position. If so, why would someone be sent an arrears notice? Surely, by definition, an arrears notice should be sent to people only if they are in arrears. If they are not, they should not receive the letter.

Gerry Sutcliffe: This is where the debate on missing payments becomes over-complicated. The amendment does not meet the technical requirements to consider the four weeks or payments over 12 months, so I think that the best way forward is to say that if the hon. Gentleman withdraws his amendment, I will look at how we deal with the issue in a definition and come back to it on Report. On that basis, I hope that he will withdraw his amendment.

Charles Hendry: I am prepared to do that in principle, but will the Minister agree to a meeting at the end of the Committee stage and before Report to see whether we can work out an agreed form of words? If we can agree to that meeting—I am sure that the  Liberal Democrats would be keen to attend—I will withdraw my amendment.

Gerry Sutcliffe: I am prepared to do that. We are trying to achieve a consensus, and if this is a major point, we must be able to find a form of words that meets all our requirements.

Charles Hendry: I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn. 
Clause 9 ordered to stand part of the Bill. 
Clause 10 ordered to stand part of the Bill.

Clause 11 - Failure to give notice of sums in arrears

Question proposed, That the clause stand part of the Bill.

Gerry Sutcliffe: Clause 11 sets out the consequences for the creditor or owner of failing to give an arrears notice. The Government have carefully considered appropriate sanctions for a failure to provide the notice, and I believe that the best way to make creditors or owners give arrears notices is to penalise them for non-compliance in a way that hurts them most directly.
Subsections (1) and (2) set out the periods in relation to which a creditor or owner will not have complied with the requirement to send an arrears notice. For fixed-sum credit agreements, that will be either after the 14-day period when the conditions in clause 9(1) have been met or for further notices after the six month period. For running-account credit agreements, it will be after the time when the next statement was due. The creditor or owner will comply with the relevant requirements when they have sent a notice to the debtor or hirer. 
Subsections (3) and (4) establish the consequences for the creditor or owner during the period when they should have provided an arrears notice to the debtor or hirer. During that period, they will not be entitled to enforce the agreement, charge any interest, or impose any default sum for a breach by the debtor or hirer that occurs during that period. The clause ensures that creditors or owners cannot profit from an agreement when they fail to comply with the arrears notice requirements. 
Question put and agreed to. 
Clause 11 ordered to stand part of the Bill.

Clause 12 - Notice of default sums

Question proposed, That the clause stand part of the Bill.

Gerry Sutcliffe: A key element of the Government's proposed reforms is transparency of information. An important part of that for consumers is that they should be aware of significant fees and charges placed on their accounts. The clause will require creditors and  owners to provide notices to debtors or hirers where default sums exceed a specified amount.
A default sum is defined in new section 187A as an amount payable, other than interest, by the debtor or hirer for any breach of his agreement. That could include a late payment fee, a missed payment fee or legal fees. New section 86E(2) states that creditors or owners have to give consumers a notice after the default sum becomes payable, but that notice can be incorporated in any other statement or notice sent to the debtor or hirer. Debtors or hirers should have a reasonable period before creditors or owners can impose interest on default sums. That would enable them to pay the sum before additional interest is charged. 
Under new section 86E(4), interest on the default sum can begin to accrue on the customer's account only 28 days after the notice is given. If a creditor or owner does not provide a notice, he cannot enforce the agreement. The debtor or hirer will not be liable to pay any cost for producing or sending the arrears notice. The Secretary of State will make regulations to cover the form and content of such notices, and the regulations will also prescribe the amount of the default fee to trigger the notice requirements and the period by which it must be sent. We will consult on those aspects before the regulations are made. 
It is imperative for consumers to be kept aware of their financial situation with transparent information. The clause ensures that they will be kept up to date of any charges being applied to their accounts.

Charles Hendry: Again, the clause goes right to the heart of the lack of clarity in the Bill. So many questions arise from it that we need to spend a little while addressing them. Would information on default sums—for example, when they would be imposed and how they would be calculated—have to be given when a lending agreement was made? That should be the case because it is too late to tell people the consequences when they are already incurring the charges.
Who will judge if a default sum is reasonable? Will it be the courts or the Office of Fair Trading? Why has more guidance not been given on what would be considered to be reasonable? Would the courts or the OFT have the power to reduce a default sum or to strike it out completely if it was unreasonable or if the terms whereby it could be imposed were not clear to a borrower when setting up the agreement? My impression is that clause 15 covers that, but I would be grateful for the Minister's absolute assurance that it does. There is a danger that unscrupulous firms might seek to use default sums to make up for restrictions imposed elsewhere in the Bill. It is not clear whether they would be adequately prevented from doing so, so we need further assurances from the Minister that consumers would be protected. 
We also need to know whether the default fee could be interpreted to mean that the whole outstanding part of the debt would immediately be liable to be paid, which could have extremely serious consequences for a borrower. What right of appeal would there be and how could that be considered in the time scale of  28 days before the fee becomes payable? How would the measure affect bank accounts given that if someone goes into an overdraft, a bank would have to send written notice and then wait 28 days before it could impose an overdraft fee. I am not saying that that is unacceptable—many of us have concerns about overdraft charges—but we need to understand the implications of the provisions fully. 
Returning to a concern that I raised earlier, how would the notices be delivered? Would they be posted or e-mailed? Would they have to be sent by registered post and signed for? How could we be certain that the notice is received by the right person? As the Minister knows, fundamental to the Bill is the fact that it shifts the responsibility and liability from the borrower to the lender. The lender must prove that they have acted fairly. Therefore, they would have to be certain that they got the information through to the right person and that that person understood it. That again raises issues of providing the information in different languages, for people whose first language is not English, in Braille for blind people, and in an understandable way for those with learning difficulties. Those issues are not covered by the Bill. Without those assurances and explanations, the clause is inadequate.

Gerry Sutcliffe: The information must be given in writing for the reasons that the hon. Gentleman raised about the burden of proof if a case ever got to court. It could not be sent electronically. For people with sight problems, there is no problem with Braille being used.

Michael Fabricant: The concept of a silent Whip is an impossibility in my case. When the Minister says that the information can be given in Braille, is he saying that there is an obligation on the lender that it must be provided in Braille? There needs to be some certainty for those people who are recipients of these communications.

Gerry Sutcliffe: I will not know the answer to the hon. Gentleman's question unless it comes within a short space of time. I will write to him.

Charles Hendry: May I assist the Minister by giving him some further time for additional scribbling to be done? It is an important element of the matter; may I ask him to go further and say whether it would be required to be given in Braille? How does the lender know that somebody needs the information in Braille? We are talking about institutions that have millions of clients. How do they know the ability of each one to understand English, how partially sighted they are and what learning difficulties they may have? If it is to be compulsory to provide material in Braille there must be an obligation on the lenders to know how partially sighted, or fully sighted, their customers are, which seems to me to be impossible.

Gerry Sutcliffe: The idea of thousands of people is a bit of red herring because we are saying that the lender has to give as much information as possible to the borrower on the form of the agreement. For the lender to lend responsibly he will have to know the borrower's position. For example, within the qualification of the content of the form or the  agreement, I would expect the lender to know about the person's individual circumstances.
I will write to the hon. Member for Lichfield (Michael Fabricant) in response to his question about Braille. In respect of consumer friendly language, there is no reason why the lender could not put the notice in the first language of the individual concerned. 
I do not accept the charge made by the hon. Member for Wealden (Charles Hendry) about the vagueness of the clause. As I said at the outset, we have had the fullest consultation with industry and the regulators to try to find a solution that was not bureaucratic and which met the requirement for transparency, making sure that the Bill met the requirements of the consumers and the industry. 
Clause 12, and our willingness to discuss the detail in the statutory instrument debate, is a sign that we are prepared to listen to what people have to say. We set out clearly what we mean by the notice of default in the clause.

James Brokenshire: I have a question about clause 12. Subsection (8) states:
''This section does not apply in relation to a non-commercial agreements or to a small agreement.''
The Minister clarified the reference to a small agreement this morning, but a non-commercial agreement is defined in sections 1, 8 and 9 of the Consumer Credit Act 1974 as meaning a consumer credit agreement or consumer hire agreement not made by the creditor or owner in the course of a business carried on by him. Obviously that is a slightly different approach from that taken in clause 4 in terms of a business wholly or predominantly carried on for the purposes of business. My only concern on the point is whether a difference is being made and whether it could be argued by a lender, because there is a commercial aspect to it, that they can wriggle out of giving a default notice as a consequence.

Gerry Sutcliffe: That is certainly not what we intend. I shall look at it and make sure that we clarify the position. We were clear this morning about the definition.

Charles Hendry: I am simply not persuaded by the Minister's responses. He said that as far as he is concerned the proposal is a beacon of clarity. I fully appreciate that he understands it better than I do; he is therefore in a position to answer the questions that I put to him. I shall therefore ask him again: who judges if a default sum is reasonable? Is it the court or the OFT? Why has not more guidance been given on what would be reasonable? Would the courts or the OFT have the power to reduce default sums or strike them out completely if they were unreasonable? Could the default fee be interpreted to be mean the whole outstanding part of a debt, which would immediately be liable to be paid, or does it mean something rather more narrow? What impact would that have on bank accounts going into overdraft? Would banks have to send written notices, and wait 28 days before they could impose an overdraft fee? I have still not had responses to those questions, but I understand that it is extremely clear and that I am simply being unusually, or perhaps usually, dim. 
This issue needs to be clarified further so that we can be certain that people have understood it. We understand that the Minister will write to us about Braille, but this is an extraordinarily important document. If a case went to court, the document would determine whether the deal had been fundamentally unfair. We must therefore be certain at this stage what steps the lenders need to take to ensure that they have fulfilled their legal obligations. 
The Minister said that the document cannot be sent by e-mail but must be posted, which I understand. Does it therefore need to be sent by registered post? Does it need to be signed for? How can we be certain that it has been received by the person to whom it relates and has not simply been signed off by another member of the household who has not passed it on? 
The Minister says that we are hyping things up a bit, but the vulnerable groups are the people whom we need to protect most, because they are the ones who are most likely to be victims of loan sharks and their sharp practices. The document must therefore be in a language that they understand, and we must ensure that if they are blind they can read it, and that if they have learning difficulties, they understand what they are signing up to. 
We are not making a mountain out of a molehill. This matter is at the crux of trying to protect the consumer, who is not being adequately protected at the moment.

Gerry Sutcliffe: I am sorry that the hon. Gentleman feels that way. He should understand the clause in the context of the Bill and how it relates to other situations involving examination of financial services. The detail that he requires will emerge in other discussions that we will have as statutory instruments flow from the provision. It is right that we set out the responsibilities clearly in clause 12. As ever, however, if there are differences of opinion between us, we must test them in the usual manner. I urge my hon. Friends to resist any opposition to the clause.

Charles Hendry: It is not a question of a difference of position. I have asked the Minister straightforward questions, and if he says that the clause is very clear and that we understand what is being said, it would be very helpful to have answers to those questions.
The Minister might also want to reflect on some of those questions and write to me, but distinct questions are raised by this issue, and it would be helpful to have further guidance from the Minister before we decide whether to press the motion to a vote.

Gerry Sutcliffe: I shall do my best to respond, but if I do not, the hon. Gentleman will take whatever action he believes to be appropriate.
If default sums are excessive, they may be subject to the common law on penalties. That relates to existing legislation. The unfair terms regulations provide that default sums cannot be excessive, and that the OFT can take action under the regulations. That provides some clarity, but I still believe that there will be  differences of opinion between the hon. Gentleman and me about where we are heading. 
Question put and agreed to. 
Clause 12 ordered to stand part of the Bill.

Clause 13 - Interest on default sums

Question proposed, That the clause stand part of the Bill.

Charles Hendry: Clause 13 is about the interest on default sums. It talks about a simple rate of interest, but although that appears to be straightforward enough, I am not sure that it is when one considers it further, even if we all agree that it is an admirable goal. A simple rate of interest says nothing about whether the default fee itself is reasonable. If the default fee on a £1,000 loan is £20, a compound rate of interest on that would not be unreasonable to most of us. If the default fee on that £1,000 loan is £200, we would feel that even a simple rate of interest would be unreasonable.
Has the Minister considered how that would affect people who go overdrawn on their current account, in which interest is traditionally compounded, if not initially paid? That would have serious costs for lenders—millions of pounds worth—which they would seek to recoup elsewhere, presumably from charges on non-defaulters. Why does the Minister think it right that non-defaulters should have to subsidise defaulters? 
I am concerned about the level of overdraft charges, as I mentioned earlier, but should not the real target be loan sharks with staggeringly high levels of compound interest?

Gerry Sutcliffe: Hon. Members will be aware of the high-profile cases in the press in which compound interest on default sums has resulted in massive escalation of the original debt—we are all aware of the case that is currently at appeal. The issue is one of considerable concern and clause 13 addresses it.
Creditors or owners are entitled to the cost of recovering the debt, but that should not unduly penalise debtors or hirers. The clause will prohibit the compounding of interest on default sums and allow the charging only of simple interest. A default sum will be defined in a new section 187A of the Consumer Credit Act 1974 as an amount payable, other than interest, by the debtor or hirer for any breach of their agreement. That could include, for example, a late payment fee, a missed payment fee or legal fees, as we discussed this morning. Any current agreements that permit compound interest will have to be amended to allow simple interest only. I hope that that satisfies the hon. Gentleman. 
Question put and agreed to. 
Clause 13 ordered to stand part of the Bill.

Clause 14 - Default notices

Question proposed, That the clause stand part of the Bill.

Charles Hendry: Will the Minister explain his reasoning for extending from seven to 14 days the minimum period after which a creditor or owner may take action in respect of an agreement after issuing a default notice? Does he think that that would offer greater protection for the consumer? What impact does he anticipate the change will have for lenders, particularly in terms of cost?
What evidence must there be that someone in default has received the notification? What happens if someone is away on holiday and does not know that the notification has been made? What happens if a student is away for some months over the summer vacation and the seven or 14-day period expires without their knowing that the notification has been provided?

Gerry Sutcliffe: Creditors currently have to provide a default notice under section 87 of the 1974 Act. They must do so if they wish to terminate the agreement or take any precautionary action for its breach. We are not changing the basic requirements, but there are amendments to the time of those requirements. Subsection (1) extends the period after which the notice is served before the creditor or owner may take action against the debtor or hirer from seven to 14 days. Any creditor or owner already waits that long. The period gives the debtor or hirer an opportunity to remedy the default or negotiate an alternative arrangement.
We are also amending the current requirements, permitting the Secretary of State to prescribe the information to be included in the notice, and requiring the creditor or owner to attach a default information sheet prepared by the Office of Fair Trading. We shall consult on the information to be required, which might cover some of the concerns that the hon. Gentleman raised. 
We intend to include information about whether the agreement includes an interest after judgment clause, as well as a reminder to consumers of the right to voluntary termination under sections 99 and 100 of the 1974 Act. The default information sheet will include information to help debtors or hirers who receive a default notice. The clause ensures that debtors or hirers receive impartial information at a critical time and have sufficient time to act on it. I hope that that will help the hon. Gentleman to accept the clause. 
Question put and agreed to. 
Clause 14 ordered to stand part of the Bill. 
Clause 15 ordered to stand part of the Bill.

Clause 16 - Time orders

Question proposed, That the clause stand part of the Bill.

Charles Hendry: I have pushed the point on several occasions but the Minister has dodged it without even trying to answer it. What evidence does there need to be that an arrears notice has been received? What system of delivery needs to be in place? Does notification have to be issued by registered post? Does it have to be hand delivered or can it simply be posted? How can we be certain that it has been received by the right person? So much in the Bill hangs on the ability of the lenders to prove that they have done what they should to make the borrowers aware of their responsibilities.

James Brokenshire: May I amplify that point? It is common in some legal agreements to include a deemed notice clause specifying that the person, be it the borrower or the other counter-party, will be deemed to have received a notice so many days after it is posted. We are concerned about the need for certainty in all of this, so that the provisions cannot be used against someone who is already in difficult financial straits. They might then find out that something else is labelled on them. Will my hon. Friend comment on that?

Charles Hendry: I am grateful to my hon. Friend and I am grateful for the legal expertise that he brings to the Committee.
 On occasion, it might suit the purposes of some people who receive documentation to say that they have not done so. Given that the Bill totally transfers the responsibility on to the lender—they have to produce evidence that the agreement was fair and it is assumed to be unfair unless they can do so—they will have to go to extraordinary lengths to prove that they have done everything possible to fulfil their side of the agreement. I do not believe that their company lawyers will be happy to say, ''You just put a letter in the post in an unmarked, typed envelope.'' I can see the hon. Member for Hastings and Rye (Michael Jabez Foster), who is an esteemed solicitor in the south-east of England, laughing at the back there at the thought that anybody believes that they might get away with that. 
The evidence has to be that the companies would feel an obligation to protect themselves from future court cases. They would use recorded delivery and ensure that they have a signature from the person who is affected. They would go to incredible lengths to establish whether somebody was partially sighted or blind or whether they could understand English well enough to know what the letter said. They would ensure that if someone had learning difficulties, they understood the documentation's import. 
 We need some clarity from the Minister about how this process will be done. At the moment, we are debating these issues in a vacuum and he owes it to the Committee to explain how it will happen.

Gerry Sutcliffe: I am trying not to hide away from the issue. The hon. Gentleman is forgetting what I said about the way that the Bill has been consulted on and the way that we worked closely, not just in the past few months but over a number of years, with the industry and others to consider most of the issues. He is right; the notification has to go by first-class post or by hand.  That is the same way that any similar type of notice across the sector is handled. Nobody from the industry has said that they think it would have to be sent by recorded delivery. He is being unduly cautious. I do not know whether he has had discussions with the industry on this point. The approach of sending the notification by post or by hand is appropriate.
 We have said that the relationship in these areas is quite a strong one. 
The Interpretation Act 1978 states: 
''Where an Act authorises or requires any document to be served by post (whether the expression ''serve'' or the expression ''give'' or ''send'' or any other expression is used) then, unless the contrary intention appears, the service is deemed to be effected by properly addressing, pre-paying and posting a letter containing the document and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.''
We talked about electronic mail and sending things. 
The safeguards are in place. Clause 16 deals with time orders, which we were asked for by Members on Second Reading and indeed during the previous discussion that we had.

Michael Penning: Something like 1 million letters go astray each year. I am coming at the issue from a slightly different avenue: from the point of view of a debtor. We have all received parking fines and different bits and bobs. I got something relating to the congestion charge the other day, when I had not even been in London. We assume that everything arrives and that it is all okay. The Government could bring through legislation to say, ''This has to physically happen''. Surely we must realise that at some stage it might not happen. Letters might not arrive. What would happen then? When the Minister read out something a few minutes ago, did he say that electronic communications are legal now?

Gerry Sutcliffe: We have to be very careful. I understand that Opposition Members think that there may be something that they can tie on to here in terms of lack of clarity, but default notices have been sent by post for over 30 years. The hon. Gentleman probably will not know this, but in the last Parliament I was the Minister responsible for the Post Office, so I am well aware of issues relating to Royal Mail. I can say with deep sincerity that it is unfortunate that I do not have that responsibility now.

John Battle: I have a lot of sympathy with the Opposition position, not least because they are coming from a completely different angle from the one that they adopted in the days when we discussed the poll tax in this Room, when Conservative Government Members insisted that notices regarding poll tax and rent default should not simply be posted in letter-boxes, but should be pinned to doors with nails, and we argued about whether they should be pinned to doors in envelopes or with the name and address showing. Therefore I am delighted that we are agreed that the notices will be going in envelopes and through letter-boxes. That is welcome progress. 
The hon. Member for Wealden pointed out that clarity and guidance are needed, so that people are clear on the law. I put it to the Minister that unless there is slightly more guidance, the whole thing will become a legal event, the person receiving the bill will be no further forward, the company will be playing games, at worst, and we will not have delivered what we intend to with the Bill.

Gerry Sutcliffe: I have some sympathy with my right hon. Friend's views, but we are making heavy weather of this, although that may be down to ministerial inadequacy. There is nothing new here regarding how default notices are served. They have gone through the post for the past 30 years.
Following the consumer credit White Paper there is, throughout the Bill and regulations, the ability to make the whole process transparent. At a time when the Government and, I hope, the Opposition are looking to deregulate and ensure that they do not put burdens on business, there has to be clarity, but that clarity is there, and we may be trying to force a route on this issue that is not expected in other, equally serious, matters of finance. 
I must say, Mr. Conway, that we are not really discussing time orders and clause 16, but the process of default notices which were the subject of the last clause that we debated, but in the spirit of what we are trying to achieve, I will say that I think that the issue is fine as it is, and that there has to be discussion with the sector about the statutory instruments that flow from the legislation. I hope that hon. Members support that. 
I move on to time orders, which are a key element of what we are trying to achieve to assist people—

Charles Hendry: What we are talking about is directly related to time orders because one could not apply for a time order without having first received a default notification, so the two are directly linked.
The Minister says that the method of distribution has not changed, and he is right, but the burden of proof has changed. It has shifted from the borrower having to show that something is unfair to the lender having to show that it is fair, so it has shifted fundamentally. If a case were to come to court and the lender said, ''I've got a letter in my file dated such and such, so it must have been sent,'' but the borrower said, ''I never received that,'' a lawyer would not advise the lending company that it could adequately prove that it acted fairly. The fact that the Bill changes the burden of proof means that there will be much greater pressure on companies to show that letters have been received by the people for whom they were intended.

Gerry Sutcliffe: We are getting dragged into later issues, such as the unfair credit test and the burden of proof. The burden of proof in relation to time orders and default notices has not changed. As the hon. Gentleman said, it has changed in relation to the unfair credit test, and we shall discuss the merits of that later. For the time order, however, the burden of proof remains the same. I understand that one has to get the default notice in order to apply for the time order, but one has to know what the time order means. That is the point that I was making. We will discuss  the burden of proof and the unfair credit test later, and I anticipate that hon. Members on both sides will attempt to get me to make all sorts of definitions of that test. I look forward, Mr. Conway, to reaching those clauses.
A specific request was made to ensure that people had the opportunity to apply for the time orders. Time orders may enable debtors or hirers to have more time to repay the sums owed under the agreement, and give them more time to remedy any breach of the agreement other than non-payment. Currently, the time order provisions of the Act are not often used. Few are applied for and fewer are granted. A large part of the problem is the lack of information. Debtors and hirers are not aware of the time order provisions, and we are working on ways of informing them about the orders. That will involve including information in arrears and default information sheets to be produced by the OFT. 
Another part of the problem is that people cannot apply for time orders at appropriate times. The clause therefore amends section 129(1) of the 1974 Act to allow debtors or hirers to apply for a time order after they receive an arrears notice. That will ensure that the debtor or hirer has the opportunity to apply for a time order when the problem is still developing, not when it is too late. 
It is a matter for concern that people will use the opportunity to apply for a time order simply to delay the inevitable. They may also apply simply because they can. We will therefore require people who want to seek a time order to go through certain steps. A debtor or hirer can make an application if he has notified the creditor or owner of his intention to apply for a time order, and in doing so gives details of his proposals; and if at least 14 days has passed since the notification was given to the creditor or owner. 
The requirements should not be onerous in practice. It is important that we have simple criteria that can be met by debtors and hirers. Compliance should be simple. The clause encourages creditors and owners to seek to resolve payment problems early. In addition, new subsections (4) and (5) provide that, in Scotland, debtors making applications either for or concerning a time order may be represented by a person who is not a solicitor or an advocate. That means that Scottish debtors will be in the same position as those in England, Wales and Northern Ireland. 
Notwithstanding the concerns expressed by hon. Members—I am sure that we will return to them—I hope that the clause will stand part. 
Question put and agreed to. 
Clause 16 ordered to stand part of the Bill. 
Clauses 17 and 18 ordered to stand part of the Bill.

Clause 19 - Unfair relationships between

Charles Hendry: I beg to move amendment No. 12, in clause 19, page 14, line 8, at end insert— 
'(1A) A relationship between the creditor and the debtor shall be regarded as unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties' rights and obligations, to the detriment of the debtor.'.

Derek Conway: With this it will be convenient to discuss the following amendments: No. 13, in clause 19, page 14, line 8, at end insert—
'(1A) Regulations shall make provision to indicate the circumstances in which the relationship between the creditor and debtor may be regarded as unfair.'. 
No. 14, in clause 19, page 14, line 10, after 'to', insert— 
'(a) whether the relevant terms of the agreement, or of a related agreement, is in plain, intelligible language; and 
(b) '. 
No. 15, in clause 19, page 14, line 16, at end insert— 
'(3A) If the court concludes that the relevant terms of the agreement were clear and intelligible when the agreement was made, then, notwithstanding the provisions of section 140B(11), it shall be for the debtor to prove that the relationship was unfair.'.

Charles Hendry: The clause is without doubt one of the most important in the Bill. It determines the thrust of what we are trying to achieve—a better, fairer and more responsive system for consumers. On Second Reading, Members on both sides of the House expressed their support for the new unfair relationship test that will be instigated under the clause. We all accept that the current extortionate credit test is outdated and does not work. It offers little or no protection for consumers and it is biased in favour of the credit companies. The fact that it has hardly been used in more than 30 years is evidence of its unsatisfactory nature. We have to address that imbalance.
Notwithstanding my support for a new unfair test, the Minister will be aware that most hon. Members who spoke on Second Reading have serious reservations about the way in which the clause is worded. In particular, concern was expressed about the lack of definition of what will be deemed fair and unfair under the new legislative framework. Although the two sides of the House may be seeking to achieve quite different ends from the new test, at present none of us can be certain that it will deliver what we hope for. It is a chasm that, left unfilled, would prove damaging to lenders and consumers. 
On Second Reading, the right hon. Member for Leeds, West (John Battle) talked eloquently of people's concerns about going to court. Even people who are not used to court recognise that they are up against a huge wealthy corporation with enormous resources; and without a thorough understanding of their chances of success, consumers will be deterred from pursuing cases that, if unsuccessful, would not only add to their financial difficulties but cause them tremendous stress. That view is held by the credit lenders and the consumer organisations. 
Without a thorough understanding of what lending practices will be considered inappropriate, the credit industry remains unaware of the changes it may need to make to ensure that its consumers are protected. As a consequence, the industry will become more cautious in its lending practices, and that will hit the most vulnerable the hardest. That will do more than  anything else to drive those people to loan sharks. Moreover, the vagueness of the provisions gives rise to concern about their compatibility with human rights legislation. We spoke about that on Second Reading. 
I hope that the Minister will agree that the approach to tackling unfairness in lending must be targeted and consistent. Lenders must be certain from the outset that their contracts are secure, and consumers with genuine cases must be clear about where they stand. The amendments that we have tabled are aimed at providing that certainty. 
Amendment No. 12 gives greater clarity to the balance in the relationship between the lender and the debtor by introducing the concept of consumer detriment. For too long, consumer credit law has been biased in favour of the credit industry, and it is important that the emphasis is shifted back to the consumer.

Alan Reid: I support the general thrust of the hon. Gentleman's argument, but I am concerned by the word ''significant'' in Amendment No. 12. The amendment states that the relationship will
''be regarded as unfair if . . . it causes a significant imbalance''.
I am concerned that that word would work too much in favour of the creditor. Will the hon. Gentleman explain why he included ''significant''?

Charles Hendry: I am grateful to the hon. Gentleman for his intervention. There has to be some measure of imbalance. We could debate for hours a slight imbalance moving one way or the other. In order for our proposal to be relevant, there has to have been a change of some significance. Again, the courts would have to decide that issue, but there must be some measure of how far the imbalance has gone.

Edward Vaizey: I may be able to help my hon. Friend, and I hope that I shall be able discuss this issue shortly when we debate the amendments. ''Significant imbalance'' is a legal term that is used generally to define unfairness in all precedents. That is why when the Minister considers the force of the arguments from the Opposition in Committee, he will perhaps see that considerable case law and legal texts on the definition of unfairness appear to be absent from the Bill.

Charles Hendry: I am grateful to my hon. Friend, whose intervention shows yet again what an embarrassment of riches of legal expertise we have on the Opposition Benches.
Amendment No. 13 builds on the point further, by clarifying what is meant by an unfair relationship test to be provided by regulation. Representatives on both sides of the argument have called for more detail, and they need the amendment if this part of the Bill is to benefit the consumer. 
I draw attention to annexe 1 of the unfair commercial practices directive, which contains an extensive list of commercial circumstances that may be considered unfair. Mr. Conway, you would of course rule me out of order if I were to read out the  entire list, but it highlights some commercial practices that it says are in all circumstances considered unfair. It is not an exhaustive list, but it gives guidance. For example, it highlights: 
''1) Claiming to be a signatory to a code of conduct when the trader is not.
3) Claiming that a code of conduct has an endorsement from a public body when it does not have.
7) Falsely stating that a product will only be available for a very limited time''—
which could certainly apply to financial issues— 
''or that it will only be available on particular terms for a very limited time, in order to elicit an immediate decision and deprive consumers of sufficient opportunity or time to make an informed choice.''
The list includes: 
''14) Establishing, operating or promoting a pyramid promotional scheme where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.''
It includes also: 
''18) Passing on materially inaccurate information on market conditions or on the possibility of finding the product with the intention of inducing the consumer to acquire the product at conditions less favourable than normal market conditions.''
Finally, it includes also: 
''25) Conducting personal visits to the consumer's home ignoring the consumer's request to leave or not to return except in circumstances and to the extent justified, under national law, to enforce a contractual obligation.''
Those practices in the European directive are commercial practices that in all circumstances are deemed to be unfair. We are looking for the Bill to list a similar set of circumstances that would be deemed to be unfair in this country. There is tremendous concern about the lack of clarity and we need something that provides a level playing field so that both the credit companies and the courts will understand what is going on. This clause is the crux of that. I know that other colleagues will be keen to join in the debate, because without that clarity, we are simply struggling in the dark.

Derek Conway: Before I call the next Member, I remind the Committee that I expect Members to focus on the amendments. We will have a general stand part debate when we consider the other group of amendments, but we will deal with this group of amendments first.

John Battle: I do not intend to repeat the points that I made on the Floor of the House on Second Reading, but I shall draw attention to the two points that concern me the most. The first is the fear that without clarity, the issue of unfairness will be pushed in the direction of the courts. The second is the fear that the people involved will not go to court; it is not their place of resort to get justice. I say that because, after Second Reading, I spoke to borrowers in my constituency. I went back to check. I said, ''What usually happens if you think the deal's unfair?'' Nine out of 10 times I got the answer, ''Oh, they offer me another loan on different terms or with a different body.'' So, in practice, debt could get compounded as  people are pushed further and further into debt with other companies.
We are talking about people who do not even go anywhere near the courts; they are not seen as a place to go to appeal. For many people that I represent, going to court is a massive thing. They do not go to tribunals. They are left feeling intimidated and dumbstruck by going to a school appeal, never mind going to a court to sort money out. We cannot push this Bill, which offers them some real redress, in the direction of getting them to go to court. 
That brings me back to the Office of Fair Trading. It could be said that the barrier or bulwark between the borrower and the court is the OFT. Clarity is necessary because the OFT will wait for the first court case. It will be a question of a test case. I am not a lawyer and I regularly insult colleagues on both sides of the House who are practising lawyers by saying that the last people who should make laws are lawyers because they get into the detail to such an extent that we all get lost. I apologise to lawyers in general, but I want to make this point: are we talking about a test case or about every individual case? If it is every individual case, the lawyers will have a field day. I do not want the Bill simply to be a harvest for lawyers. I mean that in the best sense: they will be trying to represent people, but cases will get stuck in the courts, without a test case and with the OFT not knowing what to do. 
I will cut to the chase: the issue is the breadth of the definition. The 1974 Act failed because the definition of ''extortionate'' was too narrow, hence there have been only 26 cases in 30 years. It did not work. Lenders said, ''We're not extortionate. We're charging 1,000 per cent. interest. We're not that bad.'' Things never happened. The unfairness test has the opposite problem: it is too broad. It could mean anything. Children regularly say to their parents: ''I don't think that was very fair.'' We know what they mean, but somehow we must narrow the bracket and get the matter clarified. That is what we are all looking for. 
We must get from that rigid definition of ''extortionate'' to a clear set of brackets. Where will they be defined? If there is not a definition in the Bill—in all justice, I am not actually sure that there needs to be to get this right—or in the guidelines to the OFT, or in background legislation, my question remains: who will define unfairness? The OFT will say, ''We can't do it. We're waiting for the courts.'' In practice, the decision will be left to the courts by default and I personally and passionately do not believe that that will help the constituents that I represent. They will not get justice as a result of that. We need to be clear. I am looking for clarity in the clause, and the amendment might help to draw that out.

Edward Vaizey: I will speak to amendment No. 12, but I may make some general remarks. I will be guided by you, Mr. Conway, as to whether I am in order.
The amendment is lifted directly from regulation 5(1) of the Unfair Terms in Consumer Contracts Regulations 1999, which came into force through a European directive of 1993 and introduced  the concept of good faith into English law for the first time. I do not wish to embarrass my hon. Friend the Member for Wealden or undermine his strong Eurosceptic credentials by pointing out that the concept of good faith comes from French and German law. That is plain, but there is an important need for further clarity. Given that the Bill as currently drafted makes no reference to the Unfair Terms in Consumer Contracts Regulations, we are left in a quandary as to whether they apply. 
I am indebted to ''Chitty on Contracts'', the bible of contract lawyers, which I have read over the last couple of weeks. Finally, I reached page 834, and I missed about 10 episodes of ''Big Brother'' to get there. Actually, I looked it up in my lunch break. Paragraph 38–207, on unfair terms says: 
''The terms of a credit agreement where the debtor is a consumer may''— 
I emphasise ''may''— 
''also be challenged by him as 'unfair' and so not binding on him under the Unfair Terms in Consumer Contracts Regulations. This may''—
again I emphasise the word, although ''Chitty on Contracts'' does not— 
''be an easier matter for him to establish than the more exacting test of an extortionate credit bargain.''
''Chitty'' is highlighting to the dedicated lawyer the possibility of using these regulations to establish a test of unfairness on an existing consumer credit contract, regardless of whether the Bill becomes law. There is no reference in the Bill to whether these regulations apply. Has the Minister received any advice from his Department or from other lawyers as to whether that is so? I may be wrong, but there is a potential division here, because the definition of unfairness as it exists in the regulations may apply only to a consumer and not to a business, but the Bill will apply to both businesses and consumers. 
The point of the amendment is to highlight the fact that, thanks to the regulations, the directive and English common law over the last 200-odd years, there has been extensive debate about what unfairness means. I simply point to the judgment of Lord Bingham in the case of Director General of Fair Trading v. First National Bank plc, in 2001, in which he gave an extensive definition of unfairness: 
''The requirement of good faith in this context is one of fair and open dealing. Openness requires that that the terms should be expressed fully, clearly and legibly, containing no concealed pitfalls or traps. Appropriate prominence should be given to terms that might operate disadvantageously to the customer. Fair dealing requires that a supplier should not, whether deliberately or unconsciously, take advantage of the consumer's necessity, indigence, lack of experience, unfamiliarity with the subject matter of the contract, weak bargaining position or any other factor listed in or analogous to those listed in Schedule 2 to the Regulations.''
Perhaps those factors could be taken into account by the Government when dealing with the Opposition. 
The judgment clearly lays out the factors. The catch-all clause, as in the Bill, is extraordinary when there is such extensive case law and regulation surrounding the concept of unfairness. It is incumbent upon the Minister to have a discussion with his officials as to whether the Bill can clarify  whether the regulations apply and, therefore, introduce some detail on the concept of unfairness.

Gerry Sutcliffe: One reason why the generality of the test is important is the change that has taken place in the consumer credit marketplace over the past 30 years. As I will explain later, we are not operating in a vacuum, and things can change dramatically. That is the real point. The extortionate credit test did not work, and we want to make sure that we do not fail in the same way again.

Edward Vaizey: I agree, but the fact remains that the 1999 regulations exist, and there is a considerable lack of clarity as to whether they will apply to the Bill.
The more general point to which the amendment speaks is the lack of certainty. In its analysis of the Bill, the Cross Industry Group on Credit writes: 
''As drafted, the provisions are flimsy on detail and do not provide legal certainty. The Bill does not contain any description or list of the matters that would be considered by a court when determining whether a relationship is unfair. The vagueness of these provisions and their lack of detail is a serious omission which gives rise to concerns about their compatibility with Human Rights legislation.''
I believe that Lloyds TSB has obtained an opinion from Michael Beloff QC to that effect. 
Given that the Bill is so vague and open, it will create a new industry—ambulance-chasing lawyers, which the right hon. Member for Leeds, West would equally condemn. It would be quite easy to put an advert in the local paper—the free sheet that goes through letterbox—saying, ''Signed a contract recently? New loan shark law can help you. Your contract may be unfair. Ring 0800 123456 and we will help.'' On a no-win, no-fee basis, lawyers can take cases to court for relatively small sums, and it might be in the creditor's interest simply to reach a settlement. 
I realise that that argument might be weakened by my saying that the ambulance-chasing lawyers will harm the creditors, not the debtors. None the less, the right hon. Member for Leeds, West well made the point that the clause is so vaguely drafted that it damages both sides. It provides certainty for neither, which is why certainty is so urgently required.

Anne Snelgrove: I also seek reassurance about the interpretation of unfair relationships, particularly in relation to 0 per cent. credit cards. My constituents, like many people up and down the country, often switch their credit card to get the benefit of 0 per cent. interest for six or nine months. They do not realise, however, that the order of repayment on such credit cards is often unfair. If they go on spending on their credit card, new spend will be paid off last, while the balance that they have transferred will be paid off first. That means that they go on accruing interest at a high rate on the new spend, although they do not realise it. The industry is estimated to make an extra £500 million a year out of that. People may assume that they have taken action on their debt and may feel virtuous, and they may reward themselves with some more spending, which gets them into greater debt. 
That arrangement is clearly not transparent and it will not do my constituents any good; indeed, it will just plunge them into greater debt. I therefore seek reassurance that the Minister will ensure that 0 per cent. credit cards are covered by the unfair relationship provisions and that he will strengthen the Office of Fair Trading, which has said that the practice I have outlined is unfair. In that way, we will get a bit more backbone behind the provisions and give a warning to the credit card companies that they cannot get away with such behaviour in future.

Alan Reid: I support what hon. Members have said about the need for clarity, and amendment No. 13 gets to the nub of the problem. We need regulations to give guidance to debtors and creditors who are thinking of going to court. If we leave the Bill as it is now, it will be up to the OFT to give guidance, as has been said, but it may well decide to wait for a test case. We would have a situation in which debtors and creditors would simply not know what their position was; they would all be waiting for a test case. Of course, most debtors would be rather apprehensive about going to court, and even if they were to find someone to take their case on a no-win, no-fee basis, they would still be apprehensive. Amendment No. 13 is important, and the Government should accept it and bring forward regulations, so that Parliament sets out the circumstances in which the relationship would be unfair, rather than leaving it up to the courts to decide.

Michael Jabez Foster: I appreciate that the Minister needs friends at the moment, and I am certainly his friend. Nevertheless, I encourage him to be careful about passing this clause without having some reservations as to how we define what we intend. There will be all sorts of specific suggestions, which I know that he will be encouraged to accept, whether that be capping of interest rates—I know that he is against that—or even the suggestions that were made on Second Reading, such as the idea that creditors should have an obligation to take account of the debtor's position before they enter into the deal. Whatever it may be, there must be more certainty than leaving it up to the judges.
As a rule, of course, I trust the judges—in case I have to go back before them. However, I do not believe that we should delegate so that the provision depends on their definition of fairness. We could all indulge in the class warfare stuff about whether we should trust the judges about what is fair. The fact is that ideas of fairness change as time goes on. I understand what my hon. Friend the Minister says in that respect: in 50 years' time, it might be a very different concept. However, we do know what we intend now to represent as fair or unfair in this context, and leaving it to the judges is almost an abdication of responsibility. 
I do not agree entirely with the hon. Member for Wantage (Mr. Vaizey) that the provision will provide an opportunity for lawyers to find work because of many cases that will arise. I do not believe that there will be any ambulance chasing because there will be no legal aid, and I cannot envisage no-win, no-fee arrangements working in that context. The problem will be that there will be no decisions until the courts  make decisions, and I believe that they will be a long time coming. Very few cases will come before the courts, so there will be a lengthy period of uncertainty as to what is and is not fair. 
I am very minded, unless my hon. Friend the Minister can convince me that he has something in mind, to support the proposal that there should, at the very least, be regulation. We could come back to that, and he could decide what is in such a regulation, but something needs to be in the Bill to allow us, rather than the courts, to make the decision.

Michael Penning: I am very concerned, like other hon. Members, that we are asking the courts to do a job that we should be doing here this afternoon. The vagaries of the Bill will make it quite difficult for the courts, even if cases get to the courts. As we know, cases do not tend to get there because they are settled easily. Debtors are worried about going to courts, because the courts are not deemed to be on their side. As I understand it, the courts can consider the legislation and have the powers to assess a much greater variety of factors and use their discretion about any factors that they deem relevant. Surely the courts will face tremendous problems, and there will have to be a major test case. The OFT will pass the buck, so it should be in the Bill that we guide the courts rather than the courts guide us.

James Brokenshire: On Second Reading, everyone expressed great concern about this aspect of the Bill, and some impassioned comments were made. The right hon. Member for Leeds, West made impassioned comments then, as he has done today. In response, the Minister said that he would take matters away with him and reconsider them. Amendment No. 13 drives to the heart of the matter: there needs to be clarity as to what is intended by unfair. If it is left to the Office of Fair Trading, we will not get that clarity.
I was grateful to the Minister for sending some of the background papers to us in advance of the sitting, particularly the OFT's note in relation to enforcement action under part 8 of the Enterprise Act 2002. Reading that, it seemed to me—as hon. Members have said—that the OFT would look to the court. It says: 
''A finding of an unfair relationship may only be made by a court.''
It goes on to refer to the fact that it would seek to publicise court decisions. Simply publishing decisions does not get to the nub of the matter. The legislation should be trying to prevent it from going to court in the first place. 
Hon. Members have talked about access to justice issues, and have asked whether people are able to get to court. We should be able to provide clarity through this Bill, and any additional regulations that sit alongside it, to the lenders and the borrowers so that if there is a dispute, it should not go anywhere near a court. The Bill should make it clear in basic terms what is fair or unfair. 
I appreciate that there may be a reluctance to go down the track of specifying in the primary legislation  what is unfair or fair, and circumstances and practices in the industry change. That is partly why we have this legislation in the first place. It is important to consider regulations to sit alongside the Bill that are more specific in prescribing the things that are bad and good so that we do not end up with expensive court cases that take time and require a whole range of circumstances to set a precedent.

Edward Vaizey: I agree that one of the advantages of amendment No. 13 is that it allows the regulations to be changed from time to time to take into account changing practices, but would my hon. Friend agree that that would not happen often because certain principles of fairness and unfairness are enduring and will remain in the regulations?

James Brokenshire: I agree with my hon. Friend. The point is that we want to be as clear as we can from the outset to give certainty to the industry, borrowers and people in tough situations who borrow money and then find out that they have signed up to things that they did not agree with. They want to have clarity when they sign up in the first place as to whether something is fair or not. They want to know whether they are being taken advantage of. It is a question of setting out practices and principles that the industry can adopt so that we raise the standard and ensure that the public are protected.
I was interested to read in the OFT guidance note: 
''The OFT will not seek to enforce part 8 powers''—
this is a reference to the Enterprise Act 2002— 
''until final guidance has been published''.
It aims to do this 
''well in advance of the new provisions coming into force.''
I would have hoped that that had been done by now. 
In considering the Bill, it would be helpful if detailed proposals were in place. It lends strength to the fact that the OFT will sit back and consider the court's interpretation. The OFT has said, ''Courts look at things on a case-by-case basis. We can't say necessarily whether something is unfair. We would need to see whether a pattern develops in the industry as a whole to judge whether there is a collective problem in doing all this.'' Again, that pushes matters back to the courts. That is not the right way to approach the process. We are able to create regulations that will clear the matter up and specify in detail what is intended. I passionately believe that that is in the best interests of the industry and, most important, of the customers and our constituents who borrow money.

Gerry Sutcliffe: I welcome the way in which hon. Members have addressed their concerns on Second Reading and in Committee today. I thank them for the depth of their research, trying to help me through an issue when it appears that there are not many friends around in relation to the unfair credit test.
I should like, if I may, Mr. Conway, although I may stray from your advice, to set out what the unfair credit test is about and then discuss the amendments. I hope that hon. Members will contain their excitement and not try to intervene as I try to get across the detail  of what we are trying to achieve. Then the decisions will be made. 
My right hon. Friend the Member for Leeds, West was with us in the previous Committee stage of the Bill and he saw me manfully defending the position, as he described it, and not getting drawn into specific details of what the test would be. So, here goes. 
The new test is designed to tackle unfairness affecting the relationship between a creditor and debtor in its entirety. On Second Reading, the new test was seen to be general, reflecting our desire to tackle all types of unfair relationships. The new test will not exist in a vacuum. In keeping with existing UK law, it is not intended to allow disaffected consumers to reopen bad bargains. In applying the new test the courts will use existing legal principles. For example, they can look at the law of contract when considering the terms of the agreement, the law of penalties when looking at the cost of fees and charges, and the principles relating to how remedies are applied in other contexts when looking at remedies under the new test. 
Clause 20 gives the court a range of remedies to apply if it finds that the relationship when considered as a whole is unfair. Those remedies will let the court deal with the harm to the debtor arising from the unfair relationship. It should go without saying that courts will apply remedies only when it is necessary, appropriate and proportionate to do so. Above all, the courts must be mindful of the requirements of the Human Rights Act 1998. 
The new test allows the courts to take account of the circumstances of the debtor and asks whether the relationship, when considered as a whole, is unfair to them. However, that does not mean that every aspect of the relationship has to be unfair for there to be an unfair relationship. The new test also works in the context of the requirements made of lenders under applicable consumer credit and consumer protection laws. Rules apply to lenders, such as the Financial Services Authority rules and the industry's codes of practice which contain the concept of fairness in dealing with consumers. Hon. Members may ask whether the new test would, for example, let the lender show how he complies with relevant laws, codes of practice and procedures or how he assesses his risk. It would do so where those are relevant matters. 
The new test will also allow the courts to tackle unfair relationships, whatever form they take, and it is not constrained by artificial definitions, factors or illustrative lists of practices. Hon. Members have, in previous debates, suggested that we should adopt an approach similar to the existing extortionate credit test by giving some shape to the concept of unfair relationship. The extortionate credit test has, as we have heard, been difficult for consumers to use in all but the most extreme circumstances. Indeed, in trying to define an extortionate credit bargain, the provision has been applied in a way that has strained its ordinary meaning and limited the courts' ability to consider all relevant issues at the cost of preventing consumers from obtaining justice. The extortionate credit test has allowed unscrupulous lenders to use it to justify  practices that could never be considered fair, and we do not want to do the same thing with unfair relationships. 
Under the new test, the court may consider the terms of the agreement, the conduct of the creditor in enforcing his rights and anything else that is relevant to making the determination. 
To assist hon. Members, I shall explain some of our thinking. I have no doubt that they will ask me whether the new test can tackle a particular practice, or will allow the courts to consider a characteristic of one of the parties, an aspect of the relationship between the parties, an industry code of practice, a legal requirement or any number of matters. The new test is a general test and the courts can consider anything that is relevant, which is why it does not refer to particular terms, practices or factors that the courts must or may consider. 
The unfairness of a credit relationship depends on its circumstances. There is no definition of ''unfair'' or an ''unfair relationship''. We risk losing the new test's effectiveness by including such definitions, and by defining it as something it is not, by straining its meaning, or by confining it in a way that means that deserving debtors cannot obtain redress. 
I believe that the concept is easily comprehended, and that ''unfair'' is not a concept that courts and lenders cannot understand. There is no list of factors that the courts should take into account, because the courts should have regard to any relevant matter. The old test has shown us the flaws of singling out some things for particular consideration, even if the provision says that the courts can consider other issues. 
For example, the extortionate credit test draws particular attention to questions of cost. Cost is often important, but it is not necessarily the cause of an unfair relationship, so we do not want the new test to make it more significant than other things that might lead to an unfair relationship. 
There is no illustrative list of practices that we might believe are wrong. That a practice happens does not automatically mean that a relationship will be unfair. In some cases, for example, a practice may lead to an ''unfair relationship'' because the debtor is not capable of acting in his best interests. In other cases, however, where the debtor can act in his best interests, it might not lead to an ''unfair relationship''. The circumstances giving rise to the ''unfair relationship'' will always depend on the case. 
I draw the attention of Committee members to other consumer protection laws that identify things as being ''unfair''. The two most notable examples are the regulations on unfair contract terms and the recently published unfair commercial practices directive. These laws form part of the context in which the new test will operate. The regulations dealing with unfair contract terms in consumer contracts allow for the prohibition of specific terms in consumer agreements on the basis that they are ''unfair''. Some of those terms are identified in a ''grey list''. 
The unfair commercial practices directive prohibits individual practices on the basis that they are ''unfair''. Again, these practices are identified in a list. These laws ban particular things. The new test does not. It asks whether the relationship between a creditor and debtor is unfair when considered as a whole. The new test concerns itself with the substance of the relationship. 
It could be that the lender has done nothing that has been defined as an ''unfair'' term or practice, but the consequence of their conduct is that there is an ''unfair relationship''. It may be that he has done some of these things, but that they are not so important, when taken in the context of the entire relationship, as to make it an ''unfair relationship''. There is therefore no need for us to have an indicative list of unfair terms or practices in the Bill. Because of these laws, lenders should know what particular terms and practices should not be used in dealing with consumers, but this test looks beyond individual terms and practices to the substance of the relationship between a creditor and debtor. 
It is important to remember that lenders can lend fairly to people less able to protect their own interests than the ordinary consumer, but in doing so, the lender should take account of the things that give rise to the consumer's vulnerability. Lenders should lend with their eyes open. They cannot simply close their eyes to something that might suggest the relationship is susceptible to unfairness because they think that they have complied with the rules. We do not want to deny consumers the opportunity of obtaining credit by imposing inflexible rules on lenders. Nor do we want lenders to apply inflexible rules in a way that harms consumers. I believe that the new test is the best way of achieving that. 
I hope that I have set out clearly what we are trying to achieve. There has been a great deal of discussion on this issue. I took note of what was said on Second Reading, and have had discussions with the industry and consumer groups. I have reconsidered all aspects of the issue, but I still passionately believe that the correct test is the one that we have set out, and that it is the right way to proceed. 
The hon. Member for Hornchurch (James Brokenshire) asked about the position of the OFT. The OFT must consult before it publishes. It is not to consult the other way round until Parliament passes the Bill. 
My hon. Friend the Member for South Swindon (Anne Snelgrove) talked about credit cards with 0 per cent. interest. She will be happy to know that the consumer credit agreement regulations were amended on 31 May 2005. They now provide that where different interest rate charges are both payable, a statement of the order or proportions in which amounts paid by the debtor will be applied must be included up front in the agreement. 
That is the greater transparency that we are trying to achieve. We want to place the unfair credit test in the wider context of alternative dispute resolutions, which we are trying to introduce right at the outset by making things very transparent. The concept is about  ensuring that there is redress for the individual consumer, and that the industry cannot and should not hide behind a list of what it wants, which then lets it off the hook in other areas. The concepts are included, and the unfair credit test is clear. 
Even if I accepted what the hon. Member for Wealden said, the amendments would not do what he wants. I ask him to accept what we are saying about the unfair credit test. We have thoroughly researched and discussed it, and we believe that it is the best way forward. I commend the test to the Committee and hope that the hon. Gentleman will withdraw the amendment.

John Battle: On a point of order, Mr. Conway. I apologise to the Committee, but this is a point of procedure. The Minister said that we have had a great deal of discussion around the issue. The usual rules are that if we discuss something in detail in Committee and divide on it, we are not able to return to that on the Floor of the House. Would that be the case for this clause?

Derek Conway: The right hon. Gentleman makes a fair point, but that rule relates only to a specifically framed amendment. The Clerks would give guidance on specific amendments, but afterwards it is at the discretion of the occupant of the Chair—normally Mr. Speaker—on whether comments would be in order in the generality of the debate. It will be possible to return to the clause.
I agreed that the Minister could make more wide-ranging observations in his remarks, but the Committee can obviously still have a stand part debate.

Charles Hendry: I am grateful for the clarification on that point of order.
The Minister said on Second Reading that he would consider the issue again. I hope that he will forgive me for thinking that he has not considered it that much. There was a tremendous amount of agreement across the Committee and the House of Commons in favour of making a change and moving forward, and I am sorry that he has not been able to move further. 
In his opening comments, the Minister talked about several areas that the court could consider. My hon. Friend the Member for Hornchurch made the essential point that our objective should be to stop the matter reaching court at all. We can require regulations to prevent the stress and agony of going to court. It is possible that if the matter goes to court, it could decide something completely contrary to the wishes of the House of Commons because it would have no guidance on what we want. Similarly, it could decide to endorse what the House wants but take five years to do that. We could shortcut that process and sort the point out without ever needing to go to court. 
On Second Reading, the hon. Member for South Swindon spoke about how she would have liked to see the outlawing of certain types of credit card. The hon. Member for Hartlepool (Mr. Wright) spoke about unprompted credit limit increases, while others mentioned the need to toughen up the situation on  credit card cheques, which could be incorporated here. The hon. Member for West Bromwich, West (Mr. Bailey) also spoke about that. There are matters that could be clarified in regulations so that both lenders and borrowers know from the outset where they stand. The danger is that people will not get the benefit of the Act for years. 
The Minister spoke about a list that the industry could hide behind, but that is not what we are discussing. It wants clarity in the same way that the consumer associations want clarity. It is not one side of the argument against the other: both aspects of the industry are united in wanting greater clarity. We could avoid hundreds of thousands of pounds being spent on expensive legal cases—I realise that they may be helpful to lawyers, but they do not help many of the rest of us. We can have the clarity that we need, and we have seen in other pieces of legislation how that can be provided, in European directives for example. We all know how it could be done. There could be a general agreement, which would make matters so much better for the consumer and mean that the full benefit of the Act would be felt much more quickly.

Edward Vaizey: I am grateful to you, Mr. Conway, for allowing me to speak again on the clause and give my own interpretation of the Minister's remarks.
The Minister's response did not take the argument forward.. One simple question for him to answer when he returns to the clause is whether the Unfair Terms in Consumer Contracts Regulations 1994 and 1999 apply to the Bill. His remarks—I say this with the greatest respect—were somewhat contradictory. On one hand, he said that the industry should not have a list behind which it could hide. Why, then, do we have those regulations and the Unfair Contract Terms Act 1997? We clearly have legislation and regulation to deal with unfairness. 
On the other hand, the Minister says that there is extensive law that should make obvious what is unfair. On that point, I agree with him. The key point is that unfairness is now a well-known concept in English law and regulations. It is not like the extortionate credit test in the Consumer Credit Act 1974, which was a unique test and therefore sat as a lonely measure that was barely used. 
This measure will potentially be used, but when we think about what will happen in practice, we see a gap. The first person to walk through a lawyer's door and say, ''I think my contract is unfair, what do you think?'', will be told, ''I don't know.'' The lawyer will have to say, ''I don't know. The unfair terms in consumer contracts regulations may apply. There is a lot of case law on unfairness, but none of it has been tested against this legislation.'' 
Even beforehand, as church groups and credit groups sit down to write guidance for the people whom the Bill is meant to help in order to tell them whether they may be signing an unfair contract, they will not be able to do it. They will know the case law and the regulations and they will have a pretty fair common-sense view of what the courts are likely to see  as unfair, but if they are being honest they will have to say that they do not know what is unfair under the Bill. That could so easily be remedied that I simply cannot understand why the Minister sits on the fence and on the one hand says that there is extensive law out there and then says that he wants to leave the test as wide open as possible.

Gerry Sutcliffe: Again, I understand where hon. Members are coming from, but there is no contradiction, in that the unfair credit terms regulations do apply. I think that I have moved a lot further than I did the last time I had these discussions, to talk about what was important and what should be important to the courts and why the extortionate credit test failed. Now, the court will be able to consider all relevant matters. I accept that hon. Members are coming from different points on this, but I fear that the industry is trying to hide behind a list. The extortionate credit test was far too high. This test, whereby all relevant matters can be considered, is far more acceptable within the confines—and it is the confines—of contract law and other laws that already exist.

Michael Jabez Foster: Is not the problem that even that is difficult to define? What is relevant? The courts are being left with a completely open book to decide what is relevant, but what might be relevant to judges might not be to us. The things that we as politicians think are very relevant, such as whether the circumstances of the individual borrower were taken into account, might be thought by judges to be irrelevant. We are leaving them with an open book and with no guidance or support whatever.

Gerry Sutcliffe: I understand where my hon. Friend is coming from, but I have every confidence that the courts will be able to determine what the definitions are. There is transparency in what we are trying to achieve. The burden of proof has changed: the lender now has to prove that he or she has acted fairly. That is in the spirit of all that we have tried to achieve. The industry, consumer groups and others that have been involved know exactly where we are coming from. I hope that my explanation gives them some comfort.. We would not achieve what we have set out to achieve if we clearly defined the unfair credit test, because we would be in the same position as before.

Edward Vaizey: The hon. Member for Hastings and Rye made a telling point, which was that it should be for us to decide what is unfair rather than judges. The irony is that leaving the test as open as possible will help lenders. They do not necessarily want a list to hide behind, because when it comes to a test of unfairness they will have the army of lawyers to call on extensive case law. The lenders will have an open book to go where they want to look for their test of unfairness. They are not restricted in any way, and in that sense money will pay.

Gerry Sutcliffe: It will regrettable if that happens. That is not what we are attempting to achieve. There are various other tests in the process of trying to resolve the differences between the lender and borrower. I take what my right hon. Friend the Member for Leeds, West said about the number of people who will get to court at the end of the day. It is  in that wider context that the Bill has been carefully drafted. I am sorry that there is a disagreement, but I feel passionately that the unfair credit test that we have outlined is the best route.
Several hon. Members rose—

Gerry Sutcliffe: I will take interventions, but I will defend the position for as long as it takes, so I hope that hon. Members will consider that.

James Brokenshire: My fear is that we will lose a golden opportunity to clarify the law and provide real protections for consumers. I believe that the legislation that predated the 1974 Act included a concept of a credit agreement being unconscionable—it is difficult to pronounce, let alone understand. However, that clearly did not work, because it was replaced by the extortionate credit bargain approach in the 1974 Act. We have an opportunity now, but I fear that if we do not take it, we will go another 30-odd years with inadequate protections for consumers. That is the fundamental point that drives us, along with the lack of clarity from the OFT, which cannot make the regulations or guidance until the law comes into force, and the fact that, as the Minister mentioned, alternative dispute resolution are to be considered. Again, how can that be done without a proper framework? That is what drives the points that we are making.

Gerry Sutcliffe: I give way to my right hon. Friend the Member for Leeds, West.

John Battle: Unlike some who write to the newspapers doubting my hon. Friend's good faith, I believe that the Bill would not even exist if he did not intend to do something about the issue. I take what he says in good faith and think that he has moved. I have listened to the debate this afternoon and in particular the contribution of the hon. Member for Wantage, who has done the research. We are not free to do or say what we want, or to make any laws we like in this place. We have to shape them in words, table amendments and ensure that they are acceptable. We receive guidance from parliamentary counsel and, if necessary, on other matters we can go to the Solicitor-General or the Lord Chancellor, as we all know.
I just wonder whether there is some space to consider whether the knitting together of the impact of other laws, to which the hon. Gentleman referred, could not be reconsidered before we consider the Bill on Report, so that we can perhaps come up with a form of words that clarifies the brackets a little better. The intention is there in what my hon. Friend has said, but I am fearful of the lawyers and the judges, who would disregard it.

Gerry Sutcliffe: I am continually reflecting on the issues that are raised. I am grateful to my right hon. Friend for not doubting my sincerity in wanting to get the Bill through. Clearly I do, because of the time—more than 30 years, which is far too long—and the maturity of the marketplace, as has been said.
Some new Members will not be aware of some of the regulations that we have implemented following the publication of the consumer credit White Paper.  We did not need primary legislation for those measures, which helped to support transparency and to set clear requirements on lenders. 
I shall make one final attempt today at explaining why we felt that the amendments did not help, although I am sure that we will return to the issue. This is the second time—the third time, perhaps—that I have tried to explain the principle. This afternoon, Committee members have pushed me to the limit of my ability to explain the situation. 
It is proposed that I specify the list of unfair practices, so that the courts know what they are. I want to explain a decision on the extortionate credit test in the case of Broadwick Securities v. Spencer that highlights the danger of that approach. The Court of Appeal was asked to consider an extortionate practice by the lender, but the practice did not fall within the list of factors under section 138 of the 1974 Act. The debtor asked the court whether the practice could come under ''any other relevant considerations'', a phrase mentioned in that section. 
The lender, offering a variable rate, had a policy of not reducing its rate of interest if market rates fell, but it did not tell the debtor that in making the agreement. The court was not prepared to look broadly at ''any other relevant considerations'' and considered that it should read that catch-all category in the light of other factors listed in the Act. It gave ''other relevant considerations'' a narrow meaning. 
That is a good example of the dangers of thinking that lists of factors can address all cases. I hope that, with that explanation, the hon. Member for Wealden will realise that the amendments will not achieve what he wants them to achieve. I have no doubt that we shall return to this issue again, but I ask my hon. Friends to oppose the amendments and to support the clause as it stands.

Charles Hendry: I immediately associate myself and my hon. Friends with the comments by the right hon. Member for Leeds, West. We all pay tribute to the Minister for his dedication in bringing this Bill back so quickly. The fact that it is the first Bill to come to Committee in this new Parliament shows how effectively he has advocated the issues involved and that the Bill has the support of the Government through his endeavours. Nothing that we say should be seen as showing any lack of respect or admiration for the work that he has done.
Our overriding objective is to keep these issues out of the courts. Once they go to court, things take time and money and the only people who benefit are the lawyers. If there is a list, bad practices will be stopped on day one, when the Bill comes into force. There will be no further delay; we will know that they are illegal. People will either stop carrying them out or know that they face prosecution. 
As it stands, it will be years—if ever—before some of those changes are outlawed. It has to be in the interests of consumers that there be clarity and that such measures come into force as quickly as possible. Otherwise, Government and Opposition Members, as they see things that are wrong, will introduce private Members' Bills, with all the vagaries that that system  implies, to try to change things. Only with the favourable backing of the Government and the Government Whips will they have any chance of making progress. As the right hon. Member for Leeds, West said, those changes would happen years later. However, we can make them happen quickly. 
I hope that the Minister believes that we tabled the amendments to try to bring forward the benefits of the legislation, rather than to disrupt or to destroy the measures in it. My sense is that there is general agreement among some Committee members about amendment No. 13, but rather less about some of the other amendments. With your permission, Mr. Conway, I shall press amendment No. 13 to a Division, but I beg to ask leave to withdraw amendment No. 12. 
Amendment, by leave, withdrawn. 
Amendment proposed, No. 13, in clause 19, page 14, line 8, at end insert— 
'(1A) Regulations shall make provision to indicate the circumstances in which the relationship between the creditor and debtor may be regarded as unfair.'. 
Question put, That the amendment be made:—
The Committee divided: Ayes 6, Noes 10.

Question accordingly negatived. 
Question proposed, That the clause stand part of the Bill.

Derek Conway: With this it will be convenient to discuss the following amendments: No. 17, in clause 71, page 54, line 10, at end insert—
'(2A) No such order shall be made by the Secretary of State, bringing into force sections 19 to 21, until advice and information has been published by the OFT under section 140D of the 1974 Act.'. 
No. 18, in schedule 3, page 65, line 22, after 'Act', insert 
'except credit agreements where the creditor is subject to the Financial Services Ombudsman Scheme for dealing with any complaints by the debtor'.

Gerry Sutcliffe: I have nothing to add to what I said when I tried to outline the purpose of the unfair credit test, which stretches across the clauses under discussion.

Charles Hendry: I will speak briefly on the two amendments. Amendment No. 17 provides that the regulations must be in place before the Act comes into force. That is simply a way of trying to get more detail on the provision. It is clear that people need a better understanding of what the Bill implies. Before it comes  into force, the full details must be described. Amendment No. 18 would amend schedule 3.
Without doubt the intended target of retrospective applications are loan sharks and irresponsible lenders who take advantage of the financial vulnerability of some consumers. Those lenders are invariably outside any formal ombudsman scheme for dealing with customer complaints. With that in mind, we are tabling an amendment to remove the issue of retrospective application. It would disapply the retrospective application provision in the case of any credit agreement that was then subject to the financial service ombudsman scheme for dealing with borrowers' complaints, but it would retain retrospective applications for all other credit agreements.

Gerry Sutcliffe: Amendment No. 17 would fetter the Secretary of State's power to commence the provisions concerning the unfair relationship test by requiring that that occur after the publication of the OFT's advice and information on how it should use its Enterprise Act powers to take action against lenders that engage in unfair relationships. The amendment appears to be based on the requirement that applies in respect of the OFT's powers to impose civil penalties. In that case, the OFT is prevented from imposing a civil penalty until such time as it publishes a statement of policy that has been approved by the Secretary of State. The two situations are very different.
The hon. Gentleman's proposal seems to assume that the new test is somehow dependent on the OFT's guidance. It is not. The OFT's guidance is simply that: guidance. It sets out the circumstances in which the OFT will take action and it does not seek to interpret or to define the concept of an unfair relationship, nor can it. The courts are not bound by the OFT's guidance and they do not have to have regard to it if it is not relevant to the particular case. The court's consideration and application of the new test is not dependent on the OFT's guidance, so it is not necessary or appropriate that the commencement of the new test should be linked with the publication of OFT guidance in that way. I ask the hon. Gentleman not to press amendment No. 17. 
Amendment No. 18 proposes that any agreement where the creditor is subject to the financial ombudsman scheme should be excluded from the operation of the new test after the end of the transitional period. As hon. Members will appreciate, the ombudsman scheme is concerned with resolving disputes; although it can, and no doubt will, resolve the vast majority of cases concerning consumer credit, some cases will still go to court. The hon. Gentleman's amendment could mean that, should the debtors wish to go to court, they will continue to be forced to rely upon the old test. This seems incongruous, given that, if such lenders are prepared to submit to the jurisdiction of the financial ombudsman, with his standard of ''fair and reasonable in the circumstances'', the unfair relationship test should cause little problem for them. 
Furthermore, as I have previously said, we want the same legal rules to apply to all debtors. We have provided transitional periods to allow time for lenders  to adjust, but that period is not permanent, as this proposal envisages, and nor should it be. All lenders should, after a period of adjustment, be required to adhere to the same standard. This proposal means that some will not. With those explanations, I ask the hon. Gentleman not to press amendment No. 18.

Charles Hendry: I am grateful to the Minister for that explanation. In light of what he has said, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn. 
Question put and agreed to. 
Clause 19 ordered to stand part of the Bill.

Clause 20 - Powers of court in relation to unfair relationships

Gerry Sutcliffe: I beg to move amendment No. 19, in clause 20, page 15, line 26, leave out subsection (8).
This is a technical amendment. Subsection (8) is unnecessary in light of the clauses 2 and 5, which remove the financial limit for regulation. 
Amendment agreed to. 
Question proposed, That the clause, as amended, stand part of the Bill.

Charles Hendry: Clause 20, particularly when one reads the explanatory notes provided by the Government, appears extremely innocuous, and very simple indeed. It runs to three and half lines. Again, however, it highlights a lack of detail in this Bill. It spells out a great range of punishments and penalties, but it does not say what you have to do to incur them. It is a bit like having traffic offences: people need to know what they have done wrong in order to incur a certain fine or number of penalty points. There is no guidance in this whatsoever. It is a bit like a Minister coming in and saying ''We have introduced a new punishment, which is a fine of £3,000'' and when we ask, ''What is it for?'' he replies, ''Well, I haven't actually thought of that yet, but I am sure it must be for something.''
All we have here is a list of penalties and punishments, without knowing what goes wrong. They are fairly broad ranging. New subsection (1)(b) says that it is to 
''require the creditor, or any associate or former associate of his, to do or not to do (or to cease doing) anything specified in the order in connection with the agreement or any related agreement''.
That seems to cover virtually everything ever invented. It really is wide. 
I think that before we start signing up to these things, we need to know what the Minister has in mind. Borrowers and lenders both need to know. There are clearly going to be great worries about going to court with absolutely no grounds for thinking that you are going to be successful. It goes back to one of the issues that my hon. Friends raised: the solicitor will say ''I do not know,'' but what people call ambulance chasers will be happy to take a test case on a no win, no fee basis, simply to find out if there is a little minefield that they can open up. 
The measure will mean that the borrowers will not want to take legal action, because they will not be certain of their ground, and the lenders will become more cautious in how they lend. That will particularly damage the people at the margins, the people whom we most seek to protect through this legislation. 
It also appears that there are different structures for different parts of the UK. It would be helpful if the Minister told us who would resolve the disputes if, for example, they were between a Scottish borrower and a Northern Irish lender, or an English borrower and a Scottish lender. The position is not clear. Once again, it comes down to the fact that there is a distinct lack of clarity in what has to be done wrong in order to incur the penalties that are set out in clause 20.

Gerry Sutcliffe: I will attempt to satisfy the concerns of the hon. Gentleman. You never know—late on a Thursday afternoon, when the House has adjourned, people may be accommodated by what they hear from the Minister.
In introducing the unfair test, the Government want to ensure that the courts have all the powers they need to deal with unfairness in credit relationships. With the existing extortionate credit test, most cases fall at the first hurdle, as we have heard, which is meeting the standard of an extortionate credit bargain. Having made the test more accessible, we do not want now to create a situation where the courts' powers are restricted. We also want to make it clear to the courts the extent to which they can go to remedy an unfair relationship. 
To that end, new section 140B(1) sets out the types of orders that a court can make about unfair credit relationships. Those powers allow the court to do what is necessary to remedy an unfair relationship. The courts' powers include requiring lenders to repay money to a debtor; to cease particular conduct; to reduce the amount payable by the debtor; to return property provided for security; to set aside any duty imposed on the debtor; to alter the terms of the agreement; or to direct accounts between parties. 
New section 140B(2) makes it clear that only a debtor or a surety can make an application for these remedies. The court cannot do so on its own initiative. They do not have to start their own proceedings to do that, but can do so in proceedings brought by the creditor. New section 140B(3) provides that the court may in imposing a remedy impose a burden on the creditor. The rules would apply in Scotland, and a sheriff could impose these remedies. They also apply in Northern Ireland where, if the agreement is less than £15,000, the debtor can go to the county court. If it is higher, he can go to the High court. 
New section 140B(10) makes it clear that the debtor or the creditor can join other parties to the action. Therefore, where the creditor has sold the loan to someone else, the debtor could bring an action against both those creditors. New section 140B(11) reflects the existing law in relation to the burden of proof when challenging agreements. It is the responsibility of the creditor to prove he has not acted unfairly where the debtor makes the allegation and provides particulars of unfairness alleged. I hope that that explanation  gives the hon. Gentleman confidence to support the clause. 
Question put and agreed to. 
Clause 20, as amended, ordered to stand part of the Bill. 
Clauses 21 and 22 ordered to stand part of the Bill. 
Further consideration adjourned.—[Mr. Dhanda.] 
Adjourned accordingly at two minutes past Four o'clock till Tuesday 28 June at Ten o'clock.